CPI AT 8:30 AND FED STATEMENT AT 2:00

Will today be of significance? As noted yesterday options have priced in a move of 1.3% to 1.4% if the CPI data is considerable different than the expected view. However, will this potential move be unwound by the outcome of the FOMC meeting? What are the odds that both events will not be an issue?
Most will state the Treasury market’s poor liquidity is deteriorating further. Inflation complacency and an overly negative growth outlook [a recession will occur shortly], increasing supply of duration and compressed volatility perhaps leaves the Treasury market suspectable to much greater downside than upside risks.
Today’s data/outcome may test how stable the Treasury market really is. The market is expecting the CPI to show that the re-rise in inflation was only a start of the year blip. How accurate is this view?
The Fed has plenty of reasons to be less dovish given last week’s labor data.
A recent NY Fed article has stated that liquidity, which has been evaporating for many years, stated liquidity issues are broaching crisis levels, remaining considerably lower than before the pandemic.
The market is the irrepressible optimist even as inflation remains sticker [and in many cases—accelerating] than expected, rising consumer inflationary expectations, but overall market complacency is great as CPI swaps continue to expect price growth will return to under 2.5% within a year.
How accurate is this view given rising cost push (wage) inflation and rising food prices and perhaps energy prices. Even though food is only about 13% of the CPI, it has a disproportionate impact on expectations, a primary variable of monetary policy.
An argument can be made that a major reason as to why the Fed is ending QT is the evaporation of liquidity and also perhaps from the bifurcation of market and consumer inflationary expectations.
The CPI is released at 8:30 and analysts are expecting a 0.1% and 0.3% increase in the overall and core inflation rate, respectively. Prices are expected to increase on a 12-month basis by 3.4% and 3.5%, respectively, a slight deacceleration from the month before.
Changing topics and continuing with the theme of the massive concentration of monies in a few names, the 10 largest capitalized companies in the S & P 500 now comprise 35% of the index’s value. Bloomberg writes the is by far the highest level in history crushing the 27% level reached in 1999.
Writing it differently, 2% of the names comprise 35% of the value. Talk about Ross Perot’s “giant sucking sound.”
Wow!
Last night the foreign markets were mixed. London was up 0.63%, Paris up 0.35% and Frankfurt up 0.52%. China was up 0.31%, Japan was down 0.66% and Hang Seng down 1.31%.
Futures are flat ahead of the data and outcome of the FOMC meeting. The 10-year is up 2/32 to yield 4.40%.